Moody's downgrades Montgomery County's credit outlook

NORRISTOWN — Moody’s Investors Service has changed Montgomery County’s bond rating outlook from “stable” to “negative,” citing reasons such as the county’s inability to meet pension obligations and several years’ of operating deficits.

Moody’s affirmed the county’s Aa1 bond rating, but altered its general obligation bond rating outlook late Friday. Investors rationalized the change due to “significant operating deficits in fiscal years 2008 through 2012 driven largely by structural imbalances that the county began to close in fiscal 2012.”

While noting that Montgomery County faces financial challenges in the coming year, Moody’s did give credit to the administration for taking “a variety of cost reduction measures that resulted in a more modest operating deficit in 2012 than in several prior fiscal years.”

In a press release issued Monday morning, Montgomery County Chief Financial Officer Uri Monson said he was not surprised by the actions taken by Moody’s.

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“Moody’s reaffirmed our rating because they know that we are aggressively and systematically addressing the problems we inherited, but they also know that our road has not been an easy one to traverse, and these challenges will not be solved overnight.

“We are emerging from a deep financial hole,” Monson went on to say.

“We are weathering steep funding cuts by the state. Real estate transactions such as the sale of our Human Services Center and One Montgomery Plaza, which will significantly enhance our position, are still pending. It is also worth noting that the market still priced us as if we had an AAA rating when we did our recent borrowing.”

Moody’s listed several strengths and weaknesses where the county both excels and needs work. The Aa1 rating reflects the county’s “sizable and diverse” larger tax base, with higher income and wealth levels, being located just outside of the City of Philadelphia. It also acknowledged the county’s strong socioeconomic profile and general low debt burden.

Areas of improvement, according to Moody’s, dealt with the county’s weakened financial flexibility, given its depleted general fund reserves, and underfunding of its pension payments.

The current board of commissioners, with a Democratic majority, has often blamed the previous board, which had a Republican majority, for the county’s fiscal woes.

Much of the county’s financial standing went downhill when the prior administration, led by then-Chairman Jim Matthews, a Republican, and Vice Chairman Joe Hoeffel, a Democrat, signed off on several projects — such as the $24 million Logan Square film studio project to Markley Street — one that county officials say is now dead in the water.

The only holdover from the previous commissioners’ board is Republican Bruce L. Castor Jr., who often objected to the spending initiatives by Matthews and Hoeffel.